Presented by: Consumer Goods Forum
The weakening rand, severe drought, electricity and petrol costs, and rising interest rates are posing severe challenges for South African grocery retailers, who are struggling to limit the impact on consumers. Over the long term, however, both retailers and suppliers are upbeat about the industry’s growth prospects, says Jon Wright, Europe, Middle East and Africa Region Manager at IGD, a UK-based research organisation and member of The Consumer Goods Forum.
Wright says there are five key developments which could help grocery retailers in South Africa grow in a challenging economic environment and highly competitive market:
- Winning by supporting shoppers:The short-term focus for retailers should be to deliver value to shoppers. “Retailers have been attempting to minimise the pain for shoppers, by not passing on the full extent of inflationary pressures. Shoprite, in its half-year results, noted that its internal inflation had halved in a year to 2.2%, and Massmart has indicated it has kept product inflation to 3.0% compared to core South African inflation of 6.0%.”
- Food-to-go to see retailers compete with restaurants:In the medium term, supermarkets are expected to compete increasingly with restaurants, and in the short term, retailers will evolve their food-for-now and food-for-later options. “Food Lover’s Market opened the Food Lover’s Eatery format in late 2015 in Cape Town, with the store strongly expanding its range of meal options. Woolworths has been driving a similar strategy, with its standalone stores adding cafes that provide a variety of meal choices for key times of the day,” says Wright.
- Strategies to target individuals and shopper missions:Retailers in South Africa are either developing smaller format stores, moving away from their core supermarket formats, or empowering store owners to better target shoppers in their locality. Food Lover’s Market and Pick n Pay are trialling new formats to target top up or food-for-now solutions, while SPAR is enabling its store owners to adapt their offers to target ‘their’ shoppers.
- Benefiting from industry’s modernisation:Despite supermarkets’ expansion and the launch of new formats, about 40% of grocery retail sales occur through traditional channels in South Africa. “This will provide a source of growth for modern retailers who are able to convert shoppers, but this isn’t guaranteed.”
- Online to support growth in the longer term:South Africa has one of the higher internet penetration rates in sub-Saharan Africa – around half of the population has internet access. “Both Pick n Pay and Woolworths are building their scale for online grocery solutions, growing awareness among shoppers. While spending on grocery ranges is likely to remain only a small part of online retailing in the medium term, the channel will provide competition for retailers in key urban centres and in non-grocery categories. As online grows, retailers will have to showcase their differentiated offers to help them stand out.”
The local and global challenges and opportunities impacting retailers will be cast under the spotlight at this year’s Consumer Goods Forum Global Summit, tobe held at the Cape Town International Convention Centre from 15 to 17 June 2016. Scores of CEOs of both global and local retail businesses and suppliers will join the Global Summit – the first of its kind on the African continent – to debate issues such as sustainability, food safety and security, and global environmental practices.
The Consumer Goods Forum Global Summit is expected to draw more than 800 delegates from over 365 companies in 40 countries. The co-chair of The Consumer Goods Forum and chairman of Pick n Pay Stores, Gareth Ackerman, will host the CEOs from the world’s most influential consumer and retail brands, such as Alibaba, Facebook, Walmart, Sainsbury’s, Nestle, McCain and Pepsico, at the prestigious event.
Manufacturers, service providers and retailers within the consumer goods industry who wish to attend this year’s Consumer Goods Forum Global Summit can register here to attend.
Read more at http://www.theconsumergoodsforum.com/ and http://www.tcgfsummit.com/